UPDATE 2-Cogeco to buy MetroCast assets for $1.4 bln to expand in the U.S.

Reuters Staff

3 Min Read

(Adds further details on the deal)

By Yashaswini Swamynathan and Liana B. Baker

July 10 (Reuters) - Canadian cable company Cogeco Communications Inc said on Monday its Atlantic Broadband unit would buy MetroCast’s assets for about $1.4 billion, expanding its presence in the United States.

MetroCast is the latest acquisition in a rapidly consolidating U.S. cable sector that has seen regional providers find new homes in recent months. In April, U.S. cable mogul John Malone’s Liberty Interactive Corp said it would acquire Alaska-based cable provider General Communication Inc while private-equity backed RCN announced it would buy Wave in May.

Cogeco shares rose about 2 percent to C$81.28.

The deal, which includes a $315 million equity investment by Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), will add about 120,000 internet and 76,000 video customers to Atlantic Broadband’s U.S. base.

The deal allows the company “to increase its presence in the growing and lucrative U.S. cable market,” Cogeco’s Chief Executive Officer Louis Audet said in a statement. In an attempt to find growth outside of Canada, Cogeco first entered the U.S. market in 2012 when it bought Atlantic Broadband for $1.36 billion.

Cogeco said it expects MetroCast to have about $230 million in revenue for 2017 and adjusted earnings of $121 million. Cogeco said Atlantic Broadband should realize tax benefits of about $310 million, and after adjusting for these tax benefits, it is paying about 9 times MetroCast’s adjusted annual earnings.